Correlation Between Beijing Mainstreets and Guotai Junan

Can any of the company-specific risk be diversified away by investing in both Beijing Mainstreets and Guotai Junan at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Beijing Mainstreets and Guotai Junan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Beijing Mainstreets Investment and Guotai Junan Securities, you can compare the effects of market volatilities on Beijing Mainstreets and Guotai Junan and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Beijing Mainstreets with a short position of Guotai Junan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing Mainstreets and Guotai Junan.

Diversification Opportunities for Beijing Mainstreets and Guotai Junan

-0.32

Correlation Coefficient

Beijing Mainstreets  Guotai Junan

Very good diversification

The 3 months correlation between Beijing and Guotai is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Mainstreets Investment and Guotai Junan Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guotai Junan Securities and Beijing Mainstreets is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Beijing Mainstreets Investment are associated (or correlated) with Guotai Junan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guotai Junan Securities has no effect on the direction of Beijing Mainstreets i.e., Beijing Mainstreets and Guotai Junan go up and down completely randomly.

Pair Corralation between Beijing Mainstreets and Guotai Junan

Assuming the 90 days trading horizon Beijing Mainstreets Investment is expected to generate 1.67 times more return on investment than Guotai Junan. However, Beijing Mainstreets is 1.67 times more volatile than Guotai Junan Securities. It trades about 0.1 of its potential returns per unit of risk. Guotai Junan Securities is currently generating about -0.08 per unit of risk. If you would invest  207.00  in Beijing Mainstreets Investment on December 25, 2024 and sell it today you would earn a total of  31.00  from holding Beijing Mainstreets Investment or generate 14.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Beijing Mainstreets Investment  vs.  Guotai Junan Securities

Beijing Mainstreets

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Mainstreets Investment are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Mainstreets sustained solid returns over the last few months and may actually be approaching a breakup point.

Guotai Junan Securities

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guotai Junan Securities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Beijing Mainstreets and Guotai Junan

The main advantage of trading using opposite Beijing Mainstreets and Guotai Junan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beijing Mainstreets position performs unexpectedly, Guotai Junan can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Guotai Junan will offset losses from the drop in Guotai Junan's long position.

The idea behind Beijing Mainstreets Investment and Guotai Junan Securities pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.